Trade Mission Report: In China, think as they think about us

China General Interest

By Gilbert Peterson

I acknowledge to being a newcomer to the ways of China. I have only travelled there the once so far, as manager of the recent NZCTA/ EMA Trade Mission to Guangzhou and the Canton Fair in April. But there are advantages in fresh eyes, and first impressions may count. So allow me if you will a moment to share a few observations.

It’s a truism that after 50 or so years China has emerged from self imposed exile from world markets, but it seems to me this may mean the perceptions of the Chinese towards the west may well be that bit more conditioned by their own culture and history.

Of course all of us look at the world with eyes conditioned by our own personal past and culture. In fact we cannot entirely escape that even if we wanted to.

But perhaps because of those 50 years of relative isolation, the Chinese are more likely than others to think that how we in New Zealand manage our business and political issues will be very similar to how they manage theirs.

So what does that matter? How does it affect the way we approach doing business with China? It seems to me it matters fundamentally.

For a start, much, if not most of China’s business enterprises are effectively owned by the state. As their owners, the politicians in China have great influence. Every aspect of business has a direct political involvement.

In New Zealand that’s not the case. The private sector goes about its business with minimal direct state involvement. We deliberately keep our government at arm’s length, to set the laws under which business is done. But we recognise in our environment at least that business does best when government is not involved. Under our rules of the game set by Parliament, business competitors keep each other honest. They seek to maximise their productivity by investment and innovation and whatever other means they can to get an edge in the market and out profit the others.

Its not so in China. The competition is just as hard in the marketplace, but the people making the rules, the local and central government politicians, are actively involved in the game. And they want and get recognition for the role they play in representing the people.

This means New Zealand business people should approach markets in China not only with the understanding that they need to develop excellent business contacts, but that they need to make sure their political connections are equally sound. Indeed, as the politicians ‘own’ most of China’s business on behalf of the people, the right political connections should be established ahead of purely business links.

Since political rank determines the level of influence, when a political leader meets and banquets with a counterpart, he or she effectively endorses trade between his party and those of the visiting business delegation. Being invited to attend a banquet with people with the right political connections can almost be tantamount to an invitation to sign a business deal.

An example of how this works in practice surfaced during our Trade Mission to Guangzhou. As political rank confers status in China, it turned out the mayor of Guangzhou, which has of course the sister city relationship with Auckland, was unable to meet our delegation in the absence of Auckland’s Mayor Banks. (Mayor Banks was obliged to withdraw for medical reasons with the President of NZCTA, Stuart Ferguson, taking over the role.) The upshot of that was the Guangzhou business people that met our mission delegates were not as influential as they, and we, hoped.

And this brings us back to the point – business people in China suppose our businesses are subject to the same type and level of political oversight and influence as they are. So when a trade mission from New Zealand brings a mayor or cabinet minister along to meet them, they recognise the business people on the mission are to be reckoned with. They are important because they have official sanction from the powers that be in New Zealand.

Without mayors and political figures, our business people in China are just more business people and there’s millions of them everywhere. So why would a Chinese person deal with individual Kiwi businesses if they cannot demonstrate they have the right political connections needed to back up their word back in New Zealand? In China we need to think as the Chinese think about us.

The self same principles apply at the highest level. When New Zealand signed the FTA with China, as a nation we were given the most senior trade endorsement possible. As witness to the signing China’s Premier Wen Jiabao gave China’s business people license to trade on preferential terms with New Zealand.

In light of this the FTA takes on a scale and significance most of us are still to comprehend. Under the FTA we can expect New Zealanders to get the inside running across business dealings!

Every group we met in Guangzhou, far from the Beijing, were very aware the FTA had been signed. As New Zealanders we were to be given preferential access to others in China, and with favoured status. I experienced this myself, at the banquet given for the country representatives exhibiting at the Canton Fair. I was asked to sit next to our host, ahead of some 15 other much larger country exhibitors. Remember, China’s politicians own most of the business.

The objectives of our modest mission of 10 company representatives were largely met. They were to get our business people to places they would not otherwise get as individuals, and to meet business people they would not normally be able to meet. We explored business opportunities arising from the Canton Fair, through business meetings arranged by the China Council for the Promotion of International Trade (CCPIT) and the China Foreign Trade Centre (CFTC) in Guangzhou, and through arranged site visits.

The NZTE office and staff in Guangzhou headed by Consul General Alan Young provided invaluable assistance in negotiating with the Chinese authorities on the ground. Two NZTE staff also provided excellent translation and negotiation services for Mission delegates in their individual trade negotiations.

All three exhibitors at the Fair did good business, taking advantage not only from local Chinese interest, but of the huge numbers of traders attending from around the globe. Indeed, the Canton Fair is a vast meeting place for traders of all kinds. The gains to be had from the Fair are just as much with Chinese business people as they are with traders from other countries.

Wed 16 - A day arranged by Auckland City Council with the China Council for Promoting International Trade (CCPIT) as part of Auckland’s sister city relationship . This included a seminar and business meetings for trade mission delegates to meet local business people.

A visit to Pearl River New Town and an official banquet hosted by Guangzhou city.

Thu 17 - Visits to Guangzhou University City/Panyu to two of 10 universities; to Clifford Estate/Panyu – 115,000 people in gated community, to a healthcare/hospital (medical tourism) with briefings by city representatives on the economy and prospects of the Panyu region. .

NZTE in Guangzhou were very helpful, and our association between NZ China Trade Association and EMA meant we were able to split the work load and use each of our organisation’s lines of influence to good advantage.